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Interview with James Alexander, Commercial Officer at Invast Global
How is bank regulation helping Invast Global win market share from traditional prime brokerages?
There is no doubt that the suite of bank focused regulations has been a tailwind for Invast. Of the regulations currently curtailing banking activities in Prime Broking, Basel II has been the greatest catalyst for the shift in appetite to onboard various client types, especially smaller or emerging managers and brokerages looking to distribute products to a broad retail audience.
MiFID / MiFIR are also having an impact, generally favouring the boutique organisations who can respond rapidly
Hedge fund managers are putting their prime brokers under continued pressure to be more transparent and open with respect to how they set their revenue targets and how they determine their costs for stock lending, commission rates, and margin finance.
For the last two decades, the PB operating model has been rather opaque, with very little consistency over how one bank prices its services versus another. It worked perfectly well but as new regulation such as MiFID II in Europe requires fund managers to demonstrate they are delivering best execution for their investors, PBs are having to respond accordingly. This
One of the clearest manifestations of technology innovation is the way in which it is enhancing transparency in all aspects of the investment funds industry, from front-office portfolio analytics and trading cost analysis, middle-office investor reporting, to back-office compliance and accounting.
This is also benefiting prime brokers as they look to better service their clients and develop more trusted partnerships. One bank that is working hard to drive the transparency agenda is Societe Generale Prime Services.
“What we have discovered is the more transparent you are, the more things you put on the table at the outset, the better the
Starting up a hedge fund is a challenging endeavour. Hiring staff, implementing all the necessary risk controls and regulations as well as running the organisation profitably, is far from easy. Many new hedge funds fail every year. However, starting a successful new hedge fund is still possible if one takes a pragmatic approach by outsourcing as many of the operational parameters as possible, including trading and execution.
“We have the infrastructure in place, which is a big benefit to any new hedge fund manager and effectively offer a hedge fund hotel-type model,” comments Jerry Lees (pictured), Chairman of Linear Investments.
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Increasingly, boutique prime brokers are gaining favour among both emerging and established hedge fund managers as they seek to develop higher-touch, more meaningful relationships. This is understandable against a backdrop of uncertainty in recent years, with bank-owned primes culling non-profitable hedge funds as they deal with the pressure of managing their balance sheets more effectively under Basel III.
At the end of the day, hedge funds want the stability of long-term PB relationships; something that GPP, a London-based boutique prime, has been more than willing to offer.
“The allure of the boutique prime broker is that we provide access to
In the current market environment, hedge fund allocators face a bit of a Catch 22. With markets continuing to move north – the S&P 500 was up 19.8% during 2017 (as of 28 December) – there is a strong argument to invest in long-only passive products. Even if investors, worried about a market correction, increase their exposure to hedge funds, how do they determine the extent to which a manager’s performance is alpha-driven as opposed to beta-driven?
“We did some research that looked into this a number of months ago, which at that time suggested that in the aggregate, fund performance
Prime brokerage divisions are focused on the task at hand of maximising their revenues at a time when the largest bank-owned operators face stiff competition from specialised, boutique primes, keen to offer clients a more inclusive, high-touch service.
The more diverse one’s revenue streams, the better. The days of taking in as many hedge funds as possible, on the assumption that trade revenues and commissions would boost a bank’s coffers, are long gone. This myopic approach, without fully understanding the total book of business a hedge fund might be doing beyond merely the equities desk, feels oddly out of place
Intercontinental Exchange (ICE) and Blockstream, a specialist in blockchain technologies and financial cryptography, have launched the Cryptocurrency Data Feed offering real-time cryptocurrency information and will initially include data from more than 15 cryptocurrency exchange venues globally.
The exclusive agreement between ICE Data Services and Blockstream offers extensive coverage of prices and order book data for bitcoin and several other leading cryptocurrencies.
“With the broad array of cryptocurrencies and exchanges, and given the price variances between exchanges, it’s critical that investors have a comprehensive source of pricing information,” says ICE Data Services President and COO, Lynn Martin (pictured). “We’re excited
Man AHL’s TargetRisk strategy has returned 33 per cent since its launch in December 2014, ranking it in the top decile in comparison to its peer group. The strategy has also been awarded a five star rating by Morningstar.
Managed by Russell Korgaonkar (pictured), Man AHL’s Director of Investment Strategies, and his team, the strategy applies Man AHL’s advanced techniques to long-only investment, as developed through three decades of quantitative expertise in alternatives. It seeks to produce a stable return stream across macroeconomic environments through exposure to a diverse range of global markets, combined with dynamic capital protection techniques which
Visible Alpha, an investment research technology firm founded by some of the world’s leading investment banks, has secured an additional USD38 million of equity financing.
Visible Alpha will use this investment to fuel its explosive growth and maintain its leadership position among firms driving efficiency, transparency and alpha generation in the institutional research process and helping solve for the research valuation and budgeting requirements of MiFID II.
This recent round is led by Goldman Sachs (GS) with additional participation from Banco Santander through its VC arm, Santander InnoVentures, Exane BNP Paribas, Macquarie Group, Royal Bank of Canada and Wells
